India Renewable Energy Advisor PDF

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EAI India Renewable Energy Advisor

www.eai.in

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Preface

The Indian growth story is well known; what is not as well known is the Indian renewable energy
growth story, which has been putting in impressive performances last few years. This guide from EAI
provides the highlights of renewable energy in India.

India has had a significant contribution from the large hydro power sector since its independence,
with almost 20% of its total installed power capacity still coming from this sector. Its progress on
utilizing the rest of the renewable energy sources has however been relatively recent, with wind
power being the most prominent face of the renewable energy sector for the past decade.

Since 2010, there have been significant activities in a few other Indian renewable energy sectors as
well, most notably solar. With the announcement of the ambitious National Solar Mission in 2010
and the subsequent implementation of the initial stages of the mission, the Indian government has
shown its eagerness in harnessing the significant potential that solar presents for India. Other
renewable energy sectors showing significant progress are small hydro and biomass power. Some
segments that show little activity currently - like wave, tidal and geothermal, for instance have the
potential for significant growth in future.

This wide spectrum growth in the Indian renewable energy sector implies significant opportunities
for companies.

The EAI India Renewable Energy Advisor is a ready reference for those companies keen on entering
the renewable energy industry. The Advisor comprises the first comprehensive compilation of data
on critical parameters for all the important sectors of the Indian renewable energy industry. This
guide was last revised in August 2011.

EAI is Indias leading consulting and business intelligence firm, with a dedicated focus on renewable
energy and clean technology. Our work has benefitted over a hundred Indian and foreign companies
exploring the Indian renewable energy segment. More about us can be known from www.eai.in

The Advisor has been prepared to be a part of the 5
th
Renewable Energy India 2011 Expo,
organized by the Exhibitions India Group. EAI thanks Exhibitions India for providing this opportunity
and wishes all the best for the success of the Expo.

I hope you find this guide useful in your efforts to participate in the exciting Indian renewable energy
industry.

Narasimhan Santhanam
Cofounder and Director
Energy Alternatives India (EAI) www.eai.in
narsi@eai.in

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India Renewable Energy & Cleantech Highlights

Over 400 million Indians living in about 60,000 villages have no
access to electricity

Between 2005 and 2010, investments in renewable energy in
India grew almost 500%

Even at todays high costs for solar, power from solar costs less
than power from diesel gensets (Rs. 10 per unit vs. Rs. 13 per
unit)

Solar based industrial heating and drying can save up to 4.5
million T of oil per year

Fewer than 1% of Indias power plants use biomass as a fuel

Under optimal conditions, biomass power plants could have
payback periods of fewer than 3 years

Investments in small hydro grew by over 200% between 2007
and 2009

Seven of the top ten global wind turbine manufacturers have
manufacturing facilities in India

Many energy efficiency programs present attractive payback
periods of less than one year!

Biofuels contribute less than 0.5% to the total transport fuel
consumption in India

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List of Contents
1. The India Story .................................................................................................................. 8
1.1 Surging Economy ........................................................................................................... 8
1.1.1 India GDP Growth .......................................................................................... 8
1.1.2 Strong Domestic Market ................................................................................ 8
1.1.3 Vibrant Private Sector .................................................................................... 8
1.1.4 Fundamental Advantages .............................................................................. 9
1.2 Growth Drivers for India (Compared with East and South East Asia) .......................... 9
1.3 Increasing Energy Demand ........................................................................................... 9
2. Potential and Status of Indian Renewable Energy ............................................................. 10
2.1 Indias Overall Energy Scenario................................................................................... 10
2.1.1 Electricity ...................................................................................................... 10
2.1.2 Liquid Fuels .................................................................................................. 10
2.1.3 Natural Gas .................................................................................................. 10
2.2 The India Renewable Energy Story ............................................................................. 11
2.2.1. Relative Potential for Renewable Sources .................................................. 11
2.2.2. Indias Renewable Energy Status ................................................................ 12
2.3 India's Energy Needs and Drivers for Renewable Energy ........................................... 13
2.4 Potential and Status of Renewable Energy in India .................................................... 14
2.4.1 Solar ......................................................................................................................... 14
2.4.1.1 Solar PV ..................................................................................................... 14
2.4.1.2 Solar CSP ................................................................................................... 15
2.4.1.3 Solar Thermal for Heating Purposes ......................................................... 16
2.4.2 Wind Energy ............................................................................................................. 18
2.4.3 Biofuels..................................................................................................................... 19
2.4.3.1 Biodiesel .................................................................................................... 19
2.4.3.2 Ethanol ...................................................................................................... 21
2.4.4 Biomass-based Power .............................................................................................. 22
2.4.5 Hydro Power ............................................................................................................ 24
2.4.5.1 Small Hydro ............................................................................................... 24
2.4.5.2 Large Hydro ............................................................................................... 25
2.4.6 Geothermal .............................................................................................................. 26

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2.4.7 Wave & Tidal Energy ................................................................................................ 28
2.4.7.1 Tidal ........................................................................................................... 28
2.4.7.2 Wave Energy ............................................................................................. 29
2.4.8 Waste to Energy ....................................................................................................... 29
2.5 Regions with Potential for Renewable Energy ........................................................... 32
3. Investments in Indian Renewable Energy ......................................................................... 34
3.1 Details of Investments in Indian Renewable Energy .................................................. 34
3.2 FDI in Indian Renewable Energy ................................................................................. 34
3.3 List of Prominent European Renewable Energy Companies in India ......................... 35
3.4 List of Prominent US Renewable Energy Companies in India ..................................... 36
3.5 List of Prominent Indian Renewable Energy Companies ............................................ 37
4. Incentives Provided by the Indian Government for Renewable Energy ............................. 40
4.1 Incentives for Each Renewable Energy Source ........................................................... 41
4.1.1 Solar PV, Solar CSP & Thermal ..................................................................... 41
4.1.2 Wind Energy ................................................................................................. 42
4.1.3 Biomass Power ............................................................................................. 43
4.1.4 Small Hydro .................................................................................................. 44
4.2 Renewable Purchase Obligations State-wise .............................................................. 45
4.3 State-wise Feed-in-tariffs for Wind Power ................................................................. 46
4.4 State-wise Feed-in-tariffs for Biomass Power ............................................................ 47
5. Summary of Renewable Energy Costs & Returns .............................................................. 49
5.1 Levelized Cost of Electricity (LCoE) of Electricity Sources........................................... 49
5.2 Costs of Renewable Energy Sources ........................................................................... 50

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1. The India Story

1.1 Surging Economy

1.1.1 India GDP Growth

India's GDP is expected to have a growth rate of about 9% for the next five years or more,
and its GDP is expected to be over $3 trillion by 2020, making it one of the top five
economies of the world. In spite of its size and growth, India is still a low-wage economy,
making it attractive for many foreign firms to set up factories. In purchasing power parity
(PPP) terms, India is currently the fourth largest economy, and will become the third largest
by 2015.

1.1.2 Strong Domestic Market

The market, rather than the government, has been the driver of the Indian economy
in the past two decades, with the state playing a supporting role.
Large, growing urban middle class that has increasing purchasing power.
Insulation from global downturns and less volatility as a result of the large domestic
market

1.1.3 Vibrant Private Sector

Over 100 Indian companies have market capitalization of over US$ 1 billion
Over 1000 Indian companies have received foreign institutional investment
Over 125 Fortune 500 companies have R&D facilities in India

0.46
0.48
0.51
0.6
0.72
0.83
0.9
1.2 1.2
1.38
1.5
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$

T
r
i
l
l
i
o
n
YEAR
India GDP Growth
*
* estimated value

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1.1.4 Fundamental Advantages

Scale of domestic consumption is higher in India than in many other developing
countries
Qualified, skilled and low wage labor is available in plenty
Rule of law (most of the time!)

1.2 Growth Drivers for India (Compared with East and South East Asia)

India East & SE Asia
Domestic Market Exports Market
Services Oriented Manufacturing Oriented
Consumption Based Investment Based
Medium to High Tech Products Low to Medium Tech Products

1.3 Increasing Energy Demand

All the above factors imply that Indias needs for energy would increase at a hectic pace.
These substantial increases in energy demand will require a different portfolio of energy
sources in future.

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2. Potential and Status of Indian Renewable Energy

2.1 Indias Overall Energy Scenario

2.1.1 Electricity
Total Electricity Installed Capacity: 176.9 GW (Jun2011)

Source: CEA; *: excluding large hydro
2.1.2 Liquid Fuels

Consumption of petroleum products during 2009-10 was about 138 million T, while
domestic production was about 33.7 million T. Thus, over 75% of all crude was imported,
resulting in a large import bill.

Diesel is one of the main liquid fuels used in India. In addition, about 1200 MW of the grid
connected electricity generation capacity in India is fueled by diesel. A significant portion of
captive power (off-grid) plants in the country (8648 MW) are also powered by diesel. With
the widely fluctuating price of diesel and question on security of supply in India, industries
are increasingly looking at renewable sources to offset their diesel requirements.

Biofuels constitute a negligible percentage of liquid fuels used today, at about 0.40 million T
(both ethanol and biodiesel together), less than 0.5% of the total transport fuels used.

2.1.3 Natural Gas

India produced about 1.62 trillion cu ft of natural gas in 2010 and consumed about 2.27
trillion cu ft during that year. Thus, imports constitute about 28% of the total consumption.
India started becoming a net importer of natural gas starting 2004. By 2014, India is forecast
to consume 3.96 trillion cu ft of natural gas and have a domestic production of 2.52 trillion
cu. ft., the share of imports thus rising to about 36%.

Thermal
65%
Nuclear
3%
Hydro (large
hydro)
22%
Renewable
energy
sources*
10%

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2.2 The India Renewable Energy Story

2.2.1. Relative Potential for Renewable Sources

The map below provides an idea of the potential India has for various renewable energy
sources, relative to the rest of the world.

Renewable energy potential- India vs. Global

Source: World Resources Institute

The flagship of the Indian renewable energy sector is the wind energy sector whose
growth over the past few years has spurred the development of other renewable
energy based power generation systems. This, in spite of the fact that Indias total
wind energy potential is not in the highest bracket when compared to those in some
other regions in the world.
The geographic location of the country lends itself to receiving a high amount of
solar insolation this can be a catalyst for the exponential growth of solar power.
Being a country founded on an agrarian base, there is significant potential in the
field of biomass based energy generation. A large portion of this sector is yet to be
exploited in the country, with current investments mainly coming from sugar
companies and rice mills.

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There is significant potential for hydro power in India. Most of the primary power
production is from large scale hydro installations. While the overall potential for
small hydro is an order of magnitude less than that for large hydro power, small
hydro has distinct strengths and advantages that will propel its growth.

2.2.2. Indias Renewable Energy Status

Source: MNRE (as on Dec 2010)

Grid-interactive
renewable power
98%
Offgrid/Distributed
Renewable
power(including
Captive/CHP
plants)
2%
Renewable Energy in India
Total RE installed capacity : approx 19 GW
70.4%
15.6%
5.3%
8.2%
0.4%
0.1%
Grid-interactive Renewable Power in India
Wind Power
Small Hydro Power
Biomass Power (Agro-wastes/Residues).
Bagasse Cogeneration
Waste to Power
Solar Power
58.10%
27.90%
13.20%
0.10%
0.50%
0.20%
Biomass Power/Cogen.(Non-bagasse)
Biomass Gasifiers
Waste to Energy(Urban and Industrial)
Waste to Energy(Rural)
Solar PV Power Plants and Street Lights (>1kW)
Hybrid Systems
Off-grid/Distributed Renewable Power(Including
Captive/CHP plants)

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2.3 India's Energy Needs, and Drivers for Renewable Energy

Though rich in coal deposits, India otherwise has low hydrocarbon reserves (0.4% of worlds
total). More than 35% of the countrys primary energy needs are met through imports. At
the same time, the country is rich in renewable energy sources especially solar, wind,
hydro, and bio-energy. These two complementary factors set the stage for the growth of
renewable energy in India.

The key drivers for the growth of renewable energy in India are the following:

High growth rate in overall energy needs - The expansion of the overall energy
demand-supply gap is due to the increase in the populations standard of living. The
demand-supply gap in power is currently at 10.3% and is one of the key drivers of
renewable energy.

Increasing reliance on imports for fossil fuels - In 2009-10, the country imported about
80% of its domestic crude oil consumption; over 30% of the country's total imports bill
typically goes towards oil imports. In a similar vein, the growth of electricity
generation in India has been hindered by domestic coal shortages and as a
consequence, India's coal imports for electricity generation increased by 18% in 2010.

Need for a viable solution for rural electrification - A programme of grid extension and
strengthening of the rural electricity infrastructure was initiated in 2005 to benefit the
400 million Indians who lack access to electricity. While the government had planned
ambitious grid expansion programmes, concerns have been expressed, questioning in
particular the long term financial and technical sustainability of the programmes.

Electricity peak demand-supply - The CEA predicts that the electricity shortfall for the
current fiscal year (2011-2012) will be 10.3% with a peak shortage of 12.9%. The
southern region is expected to bear the brunt of the deficit.

Pressure on industry and polity to abate GHG emissions - Indias strategy for tackling
climate change is set out in its National Action Plan on Climate Change(NAPCC),
released in 2008. It includes a target to reduce the emissions intensity of Indias
economy (per unit of GDP) by 20% between 2007/08 and 2016/17.

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2.4 Potential and Status of Renewable Energy in India

2.4.1 Solar

2.4.1.1 Solar PV

Solar photovoltaic (PV) systems are characterized by conversion of solar radiation to direct
current (DC) electricity using semiconductors which in PV systems are represented by the
solar modules. The direct current generated by the system can be converted to usable
alternating current (AC) using inverters before consumption.

Total available potential Total theoretical potential over 5000 trillion kWh annually.
This represents about 25% of the worlds current total annual
consumption of electricity!

Exploited potential Exploited potential is less than 150 MW, and of that only
about 38-45.5 MW is grid-connected. (as of Jul 2011)

Projected capacity For solar CSP and PV together, the National Solar Mission
attempts to reach the following cumulative installed capacity:
By 2013: 1-2 GW
By 2017: 4-10 GW
Details on potential and status are provided for the following renewable energy
sources:
1. Solar
Solar PV
Solar CSP
Solar Thermal for Heating
2. Wind
3. Biofuels
Biodiesel
Ethanol
4. Biomass Power
5. Hydro
Small Hydro
Large Hydro
6. Waste to Energy
7. Geothermal
8. Wave and Tidal

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By 2022: 20 GW
Industry experts foresee a much higher installed capacity by
2022. EAI predicts that this could be much higher than 20
GW, at about 75 GW. KPMG has predicted that the total solar
power installation in the country could be as high as 68 GW
by 2022.

Government incentives The National Solar Mission incentives are available through
Ministry of New and Renewable Energy (MNRE) and State
renewable energy agencies. The incentives vary, depending
on whether it was proposed by the central or state
governments. Overall, incentives include a feed-in-tariff in
the range Rs 12-18 per kWh for grid connected power plants,
depending on the size of the power plant.

Investments

Government is expected to spend Rs. 84,000 crores until
2022, of which Rs. 4,400 crores has already been allocated.
The government has earmarked Rs. 1,500 crores for
investment in solar energy related projects over the next two
years.

Challenges

High capital costs of solar PV systems
Land scarcity for large solar plants near locations of high
population density
Technology obsolescence concerns and lack of clarity on
which of the two technologies crystalline or thin film
would predominate in future
Difficulty in raising finance from banks

Cost of power generation Current cost of production Rs. 10-12/kWh.This includes
O&M, amortized/depreciated capital costs, loan repayment
costs, and other expenses such as insurance.

2.4.1.2 Solar CSP

Concentrated solar power (CSP) systems use mirrors or lenses to concentrate a large area of
sunlight, or solar thermal (heat) energy, onto a small area. The concentrated light is
converted to heat which drives a heat engine (usually a steam turbine) connected to an
electrical power generator for generating electricity.

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Total available potential Total theoretical potential over 5000 trillion kWh annually.

Exploited potential Negligible. The National Solar Mission has already allocated
500 MW to Indian corporates for solar CSP based power
plants; these plants are currently in the process of achieving
financial closure.

Projected capacity 50:50 allocations for Solar PV/CSP under the National Solar
Mission (explained under solar PV) thus, installed capacity
may follow a similar trend in the future.

Government incentives The National Solar Mission incentives available through MNRE
and State renewable energy agencies are applicable for solar
CSP as well. The incentives vary, depending on whether it was
proposed by the central or state governments. Overall,
incentives comprise a feed-in-tariff in the range Rs. 10-14 per
kWh for grid connected power plants.

Investments

Inclusive of the CSP allocations under the National Solar
Mission, in all investments for about 1000 MW of solar CSP
power plants are afoot.

Challenges High capital costs
Need for scale (minimum 50 MW)and the resulting high
capital investment
Technology still evolving and not as well established as
Solar PV a lack of clarity about which of the four
competing CSP technologies would predominate in
future.

Cost of power generation Rs.9-11/kWh. This includes O&M, amortized/ depreciated
capital costs, loan repayment costs, and other expenses such
as insurance.

2.4.1.3 Solar Thermal for Heating Purposes

Solar thermal refers to the direct use of the suns heat for heating, drying (and in some
cases, cooling). This source has significant potential in India.

Solar Thermal for Industrial Heating/Drying

Outside of water heating, studies have shown that energy from solar thermal can also be
used for industrial heating and drying (both for heating and pre-heating), and has the
potential to save up to 4.5 million tons of furnace oil or diesel per year. In a market

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assessment report
1
, the potential areas for solar heating in industries were classified as
follows:

Boiler Feed Water Heating
Process Heating
Process Cooling (through VAM
2
)
Comfort Cooling (through VAM)
Hot Air Generation

Specific industries that could find solar heating and drying applicable are food and
beverages, transport, textiles and chemicals. Studies by EAI indicate significant growth
potential for this segment, as the payback periods are attractive (sometimes fewer than 3
years).

Specific challenges are present for solar thermal based heating in the context of industrial
uses where the temperature requirements are very high (beyond 400
o
C) while solar thermal
(without the use of concentrators) can produce only much lower temperatures.

Solar Water Heating

One well known sector in India that has used solar thermal in a significant way is the solar
water heating segment.

The total potential in India for solar water heating is about 140 million sq. meters. Of this,
the total installed capacity is about 3.5 million sq. meters. Every year, over 20,000 solar
water heaters are installed across India, according to some estimates. Given the attractive
payback periods for solar water heaters and the financial incentives (soft loans and
accelerated depreciation etc), it is expected this segment will experience significant growth
in the near future.

The solar thermal incentives offered by the government fall under the subsidy scheme of
the National Solar Mission. An incentive of Rs. 3000 to Rs. 6000 per square meter of
installation is being offered depending on the technology.

The National Solar Mission targets to install 20 million square meters of solar water heating
systems by 2022.

1
Market Assessment of Solar Water Heating Systems in Industrial Sectors, ABP Infrastructure Advisory
(available at: http://www.mnre.gov.in/pdf/Report-Market-Assessment-of-SWH-in-Industrial-Sector.pdf )
2
VAM Vapor Absorption Machines

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2.4.2 Wind Energy

India has the fifth largest installed wind power capacity in the world. Wind power accounts
for 8% of India's total installed power capacity.

Wind power can be broadly categorized into onshore and offshore wind power. India is yet
to exploit any offshore wind resources.

Total available potential While the official estimates put the total potential at 48,000
MW, EAI estimates, done after consultation with technical and
industry experts, suggest the potential for onshore wind in India
alone could be over 100,000 MW. This higher potential is
possible owing to significant technological improvements in the
turbines.

Exploited potential Total installed capacity is 14,157 MW (Jun 2011)
Projected capacity Estimates from the EAI Wind Research team project India having
a total wind installed capacity of over 50,000 MW by 2020,
implying an addition of about 3500 MW on average every year
until 2020.

Government incentives Feed-in-tariffs are available for wind for each state; these range
from Rs 3.39 to over Rs 5/kWh. Over and above the FiT, wind
power developers can avail accelerated depreciation benefits or
generation based incentives.
Solar PV Potential for short and medium term growth: High
Solar CSP Potential for short and medium term growth: Short term: Medium,
Medium term: High
Solar Thermal for Heating and Drying Potential for short and medium term
growth: High

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investments

Challenges Incentive Challenges FiT needs to be wind zone based, not
state based (being corrected, Jun 2011)
Transmission Challenges connectivity to grid and
evacuation infrastructure is poor
Efficiency Challenges small wind efficiency low; efficiency
of MW wind varies significantly from one location to
another

Cost of power generation Rs. 2.75-3.5/kWh this includes amortized capital costs, O&M
expenses, insurance, and loan repayment costs.

2.4.3 Biofuels

Biofuel refers fuel derived from biomass.

2.4.3.1 Biodiesel

Biodiesel refers to any diesel-equivalent biofuel made from renewable biological materials
such as vegetable oils, animal fats or from other biomass such as algae. To a large extent,
biodiesel can replace diesel in most applications.

Using the vegetable oil from feedstocks such as oilseeds as the source, biodiesel is produced
by a chemical reaction called transesterification, in which vegetable or waste oil is reacted
with a low molecular weight alcohol, such as ethanol and methanol.

2.2
2.7
3 3
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2007 2008 2009 2010
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v
e
s
t
m
e
n
t
s

i
n

$
b
i
l
l
i
o
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Year
Investments in Wind Energy
* *
* Over $3 billion each year (EAI estimate)
Wind Potential for short and medium term growth: High

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Total available potential

India has up to 60 million hectares of non-arable land but only
17 million hectare is suitable for any kind of farming to
produce biodiesel from second generation crops such as
Jatropha

Exploited potential 90,000 T versus an installed capacity of over 1.2 million T
(2010)

Projected capacity Largely dependent on the extent of mechanization introduced
in the collection and extraction stages

Government incentives 20% of fuel used should be biofuels by 2017 (National
Policy on Biofuels, 2008) though RFS (Renewable Fuel
Standards) is a mere indication of government preference
and not a mandate
Mandatory 5% blending for ethanol and biodiesel (Nov
2009)
Biodiesel is exempt from excise duty (no other central taxes
and duties are proposed to be levied)
Government agreed on a price of 34 rupees per liter of
biodiesel purchase by oil companies (Nov 2009). This price
is however said to be insufficient for biodiesel producers to
turn in reasonable profits.

Investments The largest investment seen so far was made by BP, in TATAs
8000 acre Jatropha acreage in Andhra Pradesh Rs. 41.5 crore
invested.

Bharat Petroleum, one of Indias four national oil companies,
announced a venture, Bharat Renewable Energy, which seeks
to produce one million T of biodiesel from Jatropha by 2015.

Challenges Supply of feedstock security, as availability of Jatropha seeds
and oil is poor
Price fluctuations for feedstock
Lack of confidence due to delay in implementation of the
government biodiesel policy
Lack of seed collection / oil extraction infrastructure
No minimum support price for seeds
Lack of optimal policy framework which had rendered the
price of biodiesel unsustainable

Cost of fuel production Biodiesel production cost stands at about Rs. 40 per liter

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2.4.3.2 Ethanol

Bioethanol (also referred to as ethanol) is an alcohol made by fermenting the sugar
components of plant materials. It is made mostly from sugar and starch crops, and is a
potential substitute for petrol (gasoline).

As ethanol can be produced domestically in most countries, it helps reduce the dependence
on foreign sources of oil.

Total available potential

India produces about 495 million tons of crop residues
annually; this translates to about 145 million T of ethanol
per annum
Indias total crude oil import is about 115 million T per
annum, thus cellulosic ethanol has a theoretical potential to
completely replace Indias crude oil imports

Exploited potential Fuel Ethanol 360 million liters in India (EAI estimate) vs. 87
billion liters worldwide in 2010 (0.4% of global production)

Projected capacity If India is to move to a 5% blending of ethanol with gasoline,
that alone will require a consumption of 600 million liters; a
20% target will require 2400 million liters

Government incentives 20% biofuels by 2017 (National Policy on Biofuels, 2008)
Mandatory 5% blending for ethanol and biodiesel (Nov
2009)
Government of India announced a purchase price of Rs 27
per liter for ethanol (Apr 2010)

Investments

Most ethanol in India is produced from sugar mills, and
there are typically few investments outside of the sugar
industry
Many isolated, small investments have happened in this
industry
Tata commissioned India's first sweet sorghum based
ethanol plant back in 2008, in which an initial investment of
$10 million for prototype development, and there were
plans to follow it by $150 million over the subsequent 3 - 4
years

Challenges Since ethanol is also used in chemical industries and for
potable alcohol, there is price pressure on ethanol used for
fuel production

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Low sugarcane yield per acre due to poor farming practices
Lack of utilization of advanced technology in ethanol
manufacture

Cost of fuel production Rs. 20-25 per liter

2.4.4 Biomass-based Power

Biomass can be used instead of fossil fuels such as coal, oil or natural gas as the feedstock
to produce electricity. India being an agrarian country, there is easy availability of
agricultural biomass which can be used to generate energy.

There are multiple ways to produce power from biomass. The three primary routes are:
Combustion, Gasification and Anaerobic Digestion.
Combustion is easy to understand instead of using coal or other fossil fuel, use
biomass to produce steam that runs a turbine. Combustion of biomass for power
could either be in the form of co-firing (when it is burned along with coal) or pure
play biomass based combustion.
In the case of gasification, the biomass is first gasified into a mixture of organic
gases, and this gas turn produces power in a gas engine.
Anaerobic digestion is usually applied to biomass that have a high amount of water
in them (anaerobic digestion is most used for treating organic waste such as kitchen
waste and sewage waste into energy). Under this route, microorganisms (bacteria)
act upon the organic matter present in the biomass under anaerobic (absence of air)
and convert it into biogas, which comprises predominantly methane.

Total available potential 23.7 GW (EAI estimates peg it at about 25-30 GW)
cogeneration 7-10 GW, agro-residues 17 GW

Exploited potential Biomass Direct - Combustion 800 MW (approx)
Biomass Direct - Gasification 120 MW (approx)
Bagasse Cogeneration 1466 MW installed
The total installed capacity is 2,673 MW (Jun 2011)

Biodiesel Potential for Short Term Growth: Short Term - Low, Medium Term
High
Ethanol Potential for Short Term Medium, Medium Term Growth: High

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Projected capacity EAI Estimates suggest India could have a total biomass
installed capacity of over 10,000 MW by 2022, with growth
coming from both cogeneration and agro residues.

Government incentives Customs duty exemption/reduction on parts of biomass
operated electricity generator
Excise duty exemption on parts of biomass operated
Electricity generator
Exemption in central sales tax
100 % accelerated depreciation
Income tax holiday for ten years (can be availed within 15
years).
Power sector reforms have encouraged investment in grid-
connected biomass projects.

Investments In the current Five Year Plan period (2007 to 2012), the
governments target for biomass power capacity is 1780 MW,
with 500 MW from cogeneration plants

Challenges
Feedstock supply and price security
Channeling of sugarcane bagasse for alternative uses such
as paper production
Barriers in obtaining land for biomass cultivation for large
scale applications (competition with food grain
production)

Cost of power generation Cost of electricity production Rs 3-4/kWh. This includes all
costs, including capital depreciation, O&M, insurance and
interest costs. This cost could increase over the years as the
cost of biomass increases

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Biomass Power in India Now and Future

Parameter Now (2011) Future (2020)
Distributed electricity
generation
Biomass Power (agro-
wastes/residues) has a minor
contribution of 5.3% of the
total grid connected
renewables while it contributes
to nearly 86% of off-grid power.

Estimates of potential in
the future for power
from biomass in India
varies from about 18,000
- 50,000 MW
Use in co-firing in power plants Fewer than 1% of power plants
use biomass
A much larger proportion
of plants will be powered
by biomass
Use of feedstock Primarily waste biomass and
assorted
Dedicated energy crops
Related revenue streams Some additional revenue
streams already present
A more established end
user market for co-
products
Standalone renewable power
source?
Primarily standalone mode Will be used in
conjunction with other
renewable electricity
sources

2.4.5 Hydro Power

2.4.5.1 Small Hydro

Small hydro is the second largest renewable energy contributor to electricity production in
India (after wind). From about 1500 MW end of 2002, by end of 2010 the installed capacity
had grown to about 2800 MW, growing at a CAGR of about 8% for the period.

Total available potential Estimated potential - 15,000 MW
Identified 15,384 MW through 5718 sites (Average 2.7 MW per
site)

Exploited potential Installed capacity is 3043 MW (20% of total) as of Jun 2011
Biomass Power Potential for short and medium term growth: High

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Projected capacity Target capacity addition in 11
th
plan (2007-12): 1488 MW
Installed capacity grew from 1693 MW in 2005 to 2403 in
2009. (CAGR of 9.2%). Expected to grow even faster, at 13% for
2010-15.

Government incentives PPAs with attractive tariffs
Capital subsidies
Exemptions from taxations and duties
No techno-economic clearance is required for projects up to
Rs.250 crores ($40 million) investment
17 States have so far announced their policies to invite
private sector to set up SHP projects.
Over 2600 MW capacity SHP sites offered/allotted to private
sector by the States to set up SHP projects
MNRE has created special facilities for SHP performance
testing

Investments Small hydro investment in India grew significantly since 2008 -
Rs. 2425 crore in 2009 and Rs. 2645 crore in 2010 (about 15% of
total RE investments), compared to just Rs. 617 crore in 2007

Challenges Delays and long timelines for approvals
Long distances between generation stations and
consumption centers lead to poor efficiency of transmission
and distribution
Geological and social uncertainties
Regulatory challenges

Cost of power generation Rs. 2.25-3/kWh. This cost includes O&M costs, insurance,
depreciation, and loan repayment costs

2.4.5.2 Large Hydro

Total available potential India is endowed with economically exploitable large hydro-
power potential to the tune of 148700 MW of installed
capacity.

Exploited potential The total installed capacity in India is 38,106 MW (Jun 2011)

Small Hydro Potential for short and medium term growth: High

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Projected capacity

15,627 MW is planned to be added in the 11th five year plan
(2007-2012)

Incentives

Hydro Policy 2008 has stated an objective of overcoming the
problems experienced with respect to tariff based bidding for
hydro power plants

Amount of investments

Major part of the investment is government dominated.
Investment in the 11th five year plan (2007-12) is Rs 28,000
crores.

Challenges

High capex
Large project gestation periods
Geological surprises during project implementation
Societal and environmental impacts
Inter-state and inter-regional disputes
Uneven distribution of hydro resources and possible
demand-supply mismatch

Cost of power generation Generation cost in the first ten years could be about Rs. 2.25-
3.25/kWh but it decreases after that, and could be very low
later, given that these projects have a lifespan of well over 50
years.

2.4.6 Geothermal

Geothermal energy is energy extracted from heat stored in the earth. This energy originates
from the original formation of the planet, from radioactive decay of minerals, and from solar
energy absorbed at the surface. It has been used for space heating and bathing since
ancient times, but is now known for both heating as well as for generating electricity.

There are three main methods to exploit geothermal sources:

1. Direct use of hot water from geothermal hot water reservoirs
2. Electricity from geothermal energy Geothermal power plants are generally built
where geothermal reservoirs are located within a mile or two of the surface, and use
the reservoir heat for generating steam, which runs a turbine to produce electricity.
3. Ground source heat pumps / geothermal heat pumps These heat pumps use the
stable temperature under the ground, and the consequent temperature difference
between the surface and underground, to heat or cool buildings.

Large Hydro Potential for short and medium term growth: Medium

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The Indian government has done little so far to exploit geothermal energy. Unlike in the
sectors of wind and solar energy, few benefits or incentives have been formulated or
announced to attract investment in geothermal energy.

Total available potential Claimed to be 10,000 MW but experts are confident only to
the extent of 100 MW

Exploited potential None

Projected capacity No projections yet

Government incentives 10 year tax break, incentive package still evolving

Investments Companies that have started exploring this field include LNJ
Bhilwara, Tata Power (5MW plant in Gujarat), Thermax
(3MW plant in Ladakh) and Geosyndicate Power (25MW in
Andhra Pradesh)
3

Challenges Long gestation periods involved in site prospecting, getting
licenses and testing
Unproven in India
Lack of clear policy and incentive package from the
government
Manpower and expertise for R&D and operations
unavailable in India

Cost of power generation Global estimates put the price of generation at about 6-7
cents/kWh.

3
NEDCAP Announcement (available at: http://www.nedcap.gov.in/PDFs/Geo-thermal-News.pdf)
Geothermal Potential for short and medium term growth: Low

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2.4.7 Wave & Tidal Energy

India is yet to make any significant progress in exploiting wave and tidal energy sources.

2.4.7.1 Tidal
Total available potential Total identified potential: about 9000 MW

West Coast
Gulf of Cambay (7000 MW)
Gulf of Kutch (1200 MW)

East Coast
The Ganges Delta in the Sunderbans in West Bengal for small
scale tidal power development.
Projected capacity No clear projections, but there is a 3.75 MW project coming up in
the Sunderbans (West Bengal).
Government incentives None at the moment, but Indias Ministry of New and Renewable
Energy said in Feb 2011 that it may provide financial incentives for
as much as 50 percent of the cost for projects seeking to
demonstrate tidal power.
Investments Negligible, currently
In Jan 2011, the state of Gujarat announced plans to install
Asias first commercial-scale tidal current power plant; the
state government approved the construction of a 50 MW
project in the Gulf of Kutch.
Challenges Long development timescales (some technologies have
remained at the development stage for decades)
High capital cost
Lack of infrastructure for connection of the system to the grid
Environmental issues arising out of the cable laying and other
construction works
Intermittent supply tidal power plants provide power for only
around 10 hours each day when the tide is actually moving in
or out
Regional limitations tidal power plants require a basin or gulf
that has mean tidal amplitude of 7m or above for efficient
generation

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Cost of power generation Global estimates put the price of generation at 13-15 cents/kWh
(no Indian estimates available)

2.4.7.2 Wave Energy

Total available potential The potential along the 6000 Km of Indias coast is estimated to be
about 40,000 MW these are preliminary estimates. This energy is
however less intensive than what is available in more northern and
southern latitudes.


Projected capacity

No commercial projects

Government incentives None

Investments Negligible; some preliminary efforts being made in the state of
Gujarat.

Challenges Lack of clarity about the potential
Technology immaturity
High costs
Lack of clear policy and incentive package from the government
Low energy density

Cost of power generation Global estimates put the price of generation at 15-17 cents/kWh
(no Indian cost estimates available)

2.4.8 Waste to Energy
Any organic waste from urban and rural areas, and industries, is an energy resource. Wastes
hold the potential to create renewable energy through the adoption of waste-to-energy
technologies.
In the context of energy generation, waste can be broadly classified into municipal solid
waste, sewage waste, industrial waste and agro/crop waste. Each of these waste feedstocks
have different characteristics and present varying potential and challenges for energy
generation.
Wave Power Potential for Short and Medium Term Growth: Low
Tidal Power Potential for Short and Medium Term Growth: Low

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Total available potential There exists a potential for generating an estimated 1500 MW
from municipal solid waste, and about 225 MW from sewage
waste. A further 1050 MW of energy could be recovered from
industrial wastes. Potential for agro waste is traditionally included
under biomass power potential.

Exploited potential Indian Renewable Energy Development Agency (IREDA) estimates
indicate that India has so far realized only 2% of its waste-to-
energy potential.

Over 35 waste-to-energy projects have been completed as of
2010, with an aggregated installed capacity of over 70 MW. (Jun
2011)

Projected capacity There are no reliable estimates for projected capacity addition for
waste to energy projects.

Government incentives The Ministry of Non-Conventional Energy Sources (MNES) has
been promoting waste to energy plants refuse derived fuel,
biomethanation, biogas, and gasification. The subsidy is in the
range of Rs. 1.5 crores to Rs. 3.9 crores per MW, depending on the
processes and feedstocks used.

Investments Investments have been made into waste-to-energy projects to
aggregate a total installed capacity of 72 MW (June, 2011)

Challenges Lack of segregation is a key challenge for municipal solid waste
to energy efforts.
Waste to energy is a poorly understood topic, because there
are many different types of waste and many different energy
conversion processes for each type of waste.
Lack of institutional and financial capability
Lack of viable business models in the sector,
Some of the technology options proposed are not yet proven,
either technically or economically
High capital costs

Cost of power
generation
Depending on the technology and processes used, waste to
energy projects cost between Rs 9-13 crores per MW.

If one factors government incentives, the cost of generating
power from waste varies between Rs 3.5 per kWh and Rs 6 per
kWh.

Waste to Energy Potential for Short and Medium Term Growth: Medium

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Summary of Renewable Energy Sources Growth Potential in India

Renewable Energy Source Short Term Growth
Potential
Medium Term Growth
Potential
High Potential
Solar PV High High
Solar CSP Medium High
Solar Thermal for
Heating/Drying
High High
Wind High High
Biomass Power High High
Small Hydro High High
Biofuels - Ethanol Medium High
Medium Potential
Large Hydro Medium Medium
Biofuels Biodiesel Low High
Waste to Energy Medium Medium
Low Potential
Geothermal Low Low
Wave Low Low
Tidal Low Low

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2.5 Regions with Potential for Renewable Energy

1. Solar PV/CSP - The southern states of Andhra Pradesh, Karnataka, Tamil Nadu and states
in north western India such as Gujarat, MP and Rajasthan have the best solar radiation
in the country. States such as Arunachal Pradesh, Haryana, Jharkhand, Kerala, Orissa,
Punjab, Uttar Pradesh and West Bengal also have reasonable potential.

2. Wind - Wind farms are predominantly present in the states of Tamil Nadu, Maharashtra,
Karnataka and Gujarat. Other states such as Andhra Pradesh, Rajasthan, Kerala and
Madhya Pradesh and Jharkand have good potential.

3. Biomass/biofuels - While most states in India have select regions that are rich in
biomass availability, Rajasthan, Punjab, Maharashtra, Uttar Pradesh, Tripura, Tamil
Nadu, Punjab, Orissa and Haryana are states with the highest potential for biomass
power, followed by Andhra Pradesh, Assam, Bihar, Chhattisgarh, Madhya Pradesh,
Manipur, Meghalaya, Mizoram and Nagaland. For biofuels, the most attractive states are
those that are large-scale sugar producers (for ethanol) and those that have a high
potential for Jatropha cultivation (for biodiesel). The top sugar producing states in the
country are Uttar Pradesh and Maharashtra, followed by Gujarat, Andhra Pradesh,
Karnataka and Tamil Nadu. States with good potential for Jatropha cultivation are
Andhra Pradesh, Chhattisgarh, Gujarat, Maharashtra and Rajasthan.

4. Small hydro power - Potential for run-of-river schemes exist mainly in hilly areas of
Jammu and Kashmir, Himachal Pradesh, Uttar Pradesh, West Bengal, Uttaranchal,
Karnataka, Punjab, and North Eastern states.

5. Geothermal - Geothermal potential is dependent on geotectonic, geological and
structural conditions. Potential states include Jammu & Kashmir, Himachal Pradesh,
Uttaranchal and West Bengal.

6. Energy crops - The states with high potential are Andhra Pradesh, Chhattisgarh,
Karnataka, Tamil Nadu, Rajasthan and Maharashtra.

7. Wave and tidal - The most attractive locations are the Gulf of Cambay and the Gulf of
Kutch on the west coast. The Ganges Delta in the Sunderbans in West Bengal also has
good locations for small scale tidal power development.

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States and Regions with Potential for Renewable Energy

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3. Investments in Indian Renewable Energy

3.1 Details of Investments in Indian Renewable Energy

Over the next decade, India is projected to increase its renewable energy generating
capacity to 91 GW, over five times that of the current installed capacity. According to KPMG,
the top five countries for renewable energy investments are the USA (selected by 53% of
the respondents), China (38%), India (35%), Germany (34%), and the UK (33%).

3.2 FDI in Indian Renewable Energy

From almost negligible FDI in 2006-07, Indias FDI in renewable energy increased to about
$500 million in 2009-10 a CAGR of an astonishing 300% for the period 2006-10. While
wind energy is currently the fastest growing renewable energy sector for both domestic and
foreign investments, solar (especially solar PV) is expected to contribute to a large share of
FDI within the next few years.

0.8
1.1
3.3
3.7
4
4.5
0
1
2
3
4
5
6
2005 2006 2007 2008 2009 2010
I
n
v
e
s
t
m
e
n
t
s

i
n

$

b
i
l
l
i
o
n
Year
Total Investments in Indian RE sector
CAGR - 41%
*
* EAI estimates
2.11
43.15
85.27
497.91
0
100
200
300
400
500
600
700
2006-07 2007-08 2008-09 2009-2010
I
n
v
e
s
t
m
e
n
t

i
n

$
m
i
l
l
i
o
n
Year
FDI in India Renewable Energy
CAGR - 300%

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3.3 List of Prominent European Renewable Energy Companies in India

Name Sector invested in
Joint venture partners/
Subsidiary
Corporate website
Abengoa
Solar
Solar CSP (CSP technology
transfer, Solar)
Maharishi Renewable
Energy (MREL)
www.abengoasolar.
com/corp/web/en
Centrother
m
Photovoltai
cs AG
Solar PVC (Polysilicon
processing factory).
SREI Infrastructure Finance
Ltd, Environ Energy Deck
Services (together 50%
stake) and Perseus (35%)
www.centrotherm.
de
Mola
Solaire
Produtions
GmbH,
Solar PVC (Five-year contract to
supply 125 MW of multi-
crystalline solar wafers to XL
Telecom & Energy Ltd).
Data not available
www.mola-solaire-
international.com

Germanys
IBC SOLAR
and Indias
Refex
Energy
Solar PVC (Signed a MOU with
State energy and petrochemical
department for setting up a 50
MW solar PV power plant in
Gujarat).
IBC Solar (exclusively foreign
partnership)
www.refexenergy.c
om
TATA-BP
solar
Solar PVC (Solar cell
manufacturing).
Tata & British Petroleum
(JV)
www.tatabpsolar.c
om
SunTechnic
s
Solar PV/Wind (Installation of
small scale PV/wind hybrid in
north India).
Indian subsidiary -
SunTechnics India
www.suntechnics.c
om
eSolar Solar CSP ACME Group
www.esolar.com
Vestas Wind (Factory at Sriperumbudur
near Chennai to make turbine
blades and wind turbines).
Indian subsidiary Vestas
India
www.vestas.com
Gamesa Wind (Indian subsidiary, to
produce 850KW wind turbines,
with an initial production
capacity of 200MW a year, in
the Red Hills area next to the
city of Chennai).
Indian subsidiary - Gamesa
Wind turbines www.gamesa.es/en

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Siemens Wind (Wind turbine factory in
India by 2012.)
Indian subsidiary Siemens
India
www.siemens.com/
entry/in/en
Enercon
India
Wind (Total installed capacity of
wind turbines in India exceeds
2900 MW)
Mehra Group
www.enerconindia.
net
BP Biodiesel (Project to
demonstrate the feasibility of
producing bio-diesel from
Jatropha)
The Energy and Resources
Institute (TERI)
www.bp.com/body
copyarticle.do?cate
goryId=1&contentI
d=7052055
Biogas
Nord
Biogas (Efficient biogas plants
based on a flow-storage
process, to convert bagasse to
biogas).
Local sugar factories
www.biogas-
nord.com

3.4 List of Prominent US Renewable Energy Companies in India

Joint venture
partners/ Subsidiary
Corporate website
First Solar Solar PV (manufacture of thin
film PV modules, turn-key PV
power plants)
Supplied modules for
Moser Baer
installations
www.firstsolar.com
Signet Solar Solar PVC (MOU with Tamil
Nadu to manufacture 300 MW
of thin-film PV modules).
Indian subsidiary
www.signetsolar.com
Solfocus Concentrated solar PV
systems
Moser Baer
(technology partner)
www.solfocus.com
Sun Power Solar PV (manufacture of PV
modules. Signed a deal with
Mahindra for supply of solar
panels)
Mahindra (JV)
www.sunpowercorp.com

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SPG Solar Solar PV (turn-key solar power
plant solution provider)
No data available
www.spgsolar.com
Sun Edison Solar PV (polysilicon and wafer
manufacturer)
Subsidiary of MEMC
www.sunedison.com
Solar World Solar PV (manufacture of solar
panels)
No data available
www.solarworld-
usa.com
Spire
Corporation
Solar PV (turn-key solar power
generation systems.
Announced setting up of a
manufacturing line in Jaipur)
Rajasthan Electronics &
Instruments (JV).
Indian subsidiary
Spire Solar India
www.spirecorp.com
REC Solar Solar PV (EPC) No data available
www.recsolar.com
General
Electric
Wind, Solar PV (wind turbine
manufacture, thin film panel
manufacture)
Indian subsidiary GE
India
www.ge-energy.com

3.5 List of Prominent Indian Renewable Energy Companies

Joint venture partners/
Subsidiary
Corporate website
Indosolar Solar PV (multi-crystalline
solar cell manufacturing)
Data not available
www.indosolar.co.i
n
Titan Energy
Systems Ltd.
Solar PV (manufacture of solar
PV modules)
Enfinity Belgium (JV)
www.titan-
energy.com
TATA-BP solar Solar PV (solar cell
manufacturing).
Tata & British Petroleum
www.tatabpsolar.c
om
XL Energy
Limited
Solar PV (module
manufacturing)
Corning, Kyocera Wireless,
Axesstel (partners)
www.xlenergy.com

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Moser Baer
Solar Limited
Solar PV (thin film module
manufacturing, turn-key
solutions)
Subsidiary of Moser Baer
Group
www.moserbaersol
ar.com
Kotak Urja Solar PV and Solar Thermal
(manufacture of modules,
BIPV, inverters, solar thermal
systems etc.)
Subsidiary of Kotak Group
www.kotakurja.co
m
Azure Power Solar power plant developers
and operators
Data not available
www.azurepower.c
om
RRB Energy Wind(turbine manufacture) Free Breeze Energy
Systems (UK)
www.rrbenergy.co
m
ReGen
Powertech
Wind (turbine manufacture,
plant at Kukudwad,
Maharashtra in association
with Bhilwara Energy)
Vensys Energy AG, LM
Wind Power Blades
(partners)
www.regenpowert
ech.com
Pioneer
Wincon
Wind (turbine manufacture) Wincon (Denmark)
www.pioneerwinco
n.com
Suzlon Wind (turbine manufacture,
turn-key solutions)
REpower (Germany)
www.suzlon.com
CLP India Wind energy (wind power
project developers)
Subsidiary of CLP Holdings
www.clpindia.in
AllGreen
Energy India
Pvt. Ltd.
Biomass (proposes to setup
integrated biomass resources
at various locations in India)
Indian subsidiary Allgreen
Energy Pte. Ltd.
www.allgreenenerg
y.net
Praj Biofuels (fuel production
system manufacture)
Qtreos (JV)
www.praj.net

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Nandan
Biomatrix
Biofuels (Jatropha cultivation
across various states)
Alphakat GmbH (JV)
www.nandanbiofue
ls.com
Orient Green
Power
Company Ltd.
Biomass, Wind and Small
Hydro power plant developer
Belongs to the Shriram EPC
Group
www.orientgreenp
ower.com
Green Infra
Ltd.
Wind, Hydro, Solar and
Biomass power plant
developer
Promoted by IDFC Private
Equity
www.greeninfralimi
ted.in
Ramky Enviro
Engineers Ltd.
Waste management and
waste to energy systems
(operates hazardous waste
and MSW management
facilities across the country)
Subsidiary of Ramky Group
www.ramkyenviroe
ngineers.com

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4. Incentives Provided by the Indian Government for
Renewable Energy

In the early 1980s, the Indian government established the Ministry of New and Renewable
Energy (MNRE) to encourage diversification of the countrys energy supply and satisfy the
increasing energy demand of a rapidly growing economy. The MNRE issued guidelines to all
state governments to create an attractive environment for the export, purchase, wheeling
and banking of electricity generated by renewable power projects.

The following is the framework of incentives available:
Feed-in-tariffs
Up to 80 percent accelerated depreciation for renewable energy investments
Relief in customs duty, excise duty and sales tax
Exemption from Central Sales Tax, and customs duty concessions on the import of
material, components and equipment used in renewable energy projects
Soft loans
Government policies covering wheeling, banking, buy-back, and third-party sale of
power
Income tax exemption for any single 10 year period in the first 15 years of a wind
farm
(Please note that all incentives may not be applicable to every renewable energy source)

In addition to the above government incentives, most renewable energy projects can
increase their monetization through the carbon credits trading under the Clean
Development Mechanism (CDM).

Many states in India have introduced renewable purchase obligations (RPO/RPS) for utilities
and Renewable Energy Certificates (REC) using which utilities that do not have access to
sufficient renewable energy sources could purchase credits from those utilities / companies
that generate green power. The RPO acts as the driver for the use of RECs and in turn, RECs
provide the support required to implement the RPOs.

Details of state-specific RPOs are provided in a later section.

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4.1 Incentives for Each Renewable Energy Source

4.1.1 Solar PV, Solar CSP & Thermal

PV & CSP

The "National Solar Mission", formally adopted by Prime Minister Manmohan Singh's special
panel on climate, envisages the creation of a statutory solar authority that would make it
mandatory for states to buy some solar power, according to a draft of the plan. The plan
pledges to boost output of solar energy from near zero to 20 GW by 2022. The goal is to
have 1000-2000 MW of capacity by 2013, 4000-10000 MW cumulative during the period
2013-2017 and then on to a total of 20,000 MW by 2022. The targets have an equal
emphasis for both PV and CSP, thus each is expected to have a 50% share of the total target.

As part of this plan, in Jun 2010, the MNRE announced the final guidelines for implementing
off-grid and small solar PV power plants. In July 2010, similar guidelines for larger, grid-
connected power plants were released. As of Jun 2011, 500 MW of solar CSP and 200 MW
of solar PV grid-connected projects have already been allocated. An additional 300 MW
solar PV is expected to be allocated soon.

The National Solar Mission also has the following additional objectives:
To create favorable conditions for solar manufacturing capability, particularly solar
thermal for indigenous production and market leadership.
To promote programs for off grid applications, reaching 1000 MW by 2017 and 2000
MW by 2022.
To achieve 15 million sq. meters solar thermal collector area by 2017 and 20 million
by 2022.
To deploy 20 million solar lighting systems for rural areas by 2022.

Under the plan, incentives vary, depending on whether the project is off-grid or grid-
connected.
1. Grid connected solar projects these systems are typically supported by high feed-
in-tariff. The first phase of the solar mission saw the tariffs being decided by a
reverse bidding process. The rates quoted by the winners were in the range Rs 10.9-
12.7/kWh for solar PV and 10.49 to 12.24/kWh for CSP.
2. Off-grid solar projects for solar PV projects that are off the grid, incentives have
been provided primarily in the form of capital subsidies (30% for non-priority regions
and 90% for priority regions), accelerated depreciation and in some cases, access to
soft loans (5% interest rate).

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Outside of the central schemes under the National Solar Mission, several state governments
have announced their own incentive schemes for solar PV.

State Schemes

Many Indian states are firming up their individual state schemes under the National
Solar Mission. Of these, only Gujarat, Rajasthan and Karnataka have so far announced
their schemes formally. A further five states are expected to come out with their plans
by end 2011.

Thermal

Incentives for Solar Thermal for Industrial Purposes

A subsidy of up to 30% is available from MNRE on solar furnace components
80% Accelerated Depreciation is available
IREDA provides soft loans for solar thermal projects under 2 different schemes
o Direct User Scheme
o Intermediary Scheme
For solar water heaters, soft loans at interest rates of 2%, 3% and 5% are provided
to domestic, institutional and commercial users respectively.
SNAs (State Nodal Agencies) can be approached for capital subsidies of Rs. 1900
for domestic, Rs. 1750 for institutional and Rs. 1400 for commercial
establishments, per sq. meter of installed solar water heating.

4.1.2 Wind Energy

10 year tax holiday
Low customs duty on imported components
Accelerated Depreciation (AD) benefits
In June 2008, the MNRE announced a national generation based incentive scheme
for grid connected wind power projects under 49 MW, providing an incentive of 0.5
rupees per kWh in addition to the existing state incentives.
A developer can go for either of two benefits - Accelerated Depreciation (AD) or
Generation Based Incentive scheme (GBI).
States such as Maharashtra have recently announced feed-in-tariffs based on wind
zones; this tariff structure is more closely aligned with the total amount of electricity
production possible. This framework has the potential to significantly increase the
returns for wind farm owners in India, making this sector even more attractive than
it is presently.

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4.1.3 Biomass Power

Biomass Power Production

Biomass based power plants in India can avail the following:
Capital subsidies (30%)
Accelerated depreciation (80% in first year)
Exemption from Central Sales Tax and customs duty concessions on the import of
material, components and equipment used
Preferential feed-in-tariff (varies from state to state)

Biofuels

India has a Biofuel Policy with an emphasis on biodiesel production from Jatropha and
ethanol production from sugarcane molasses. In 2004, it was decided, as a first step, to
mandate 5% blending of petrol with ethanol. An MOU between the Indian Sugar Mills
Association and Indian Oil Corporation is designed to ensure uninterrupted supplies of
ethanol for the program. The target was a 20% blend by the year 2011-12, though this
target will most likely not be achieved, going by the trends available until Jun 2011.

A National Bio-diesel Board has been created to promote, finance and support organizations
that are engaged in the field of oilseed cultivation and oil processing leading to bio-diesel
production. Indias Bio-diesel Purchase Policy prescribes that public sector oil marketing
companies should purchase bio-diesel of prescribed specification from authorized suppliers
at a uniform price that will be reviewed every six months.

State incentives for biodiesel
Incentives are usually provided through the respective state renewable energy development
agency. A reduced VAT @ 4% is provided in most states.

Support price of oil seeds
The government has fixed remunerative support prices for purchase of different oil seeds
suitable for production of biofuels.

Incentives for raising commercial plantations
For raising commercial plantations, different categories of cultivators can avail different
forms of financial assistance (subsidy, soft loans) under back ended credit linked subsidy
program of National Oilseed and Vegetable Development (NOVOD) Board under the
Ministry of Agriculture, Government of India.

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Subsidy given for planting material
50% subsidy will be provided on cost of planting material for biofuels crops such as
Jatropha. Subsidies available to agro-processing industry will be extended to bio-fuel and
bio-diesel extraction plants.

Credits and finance resources
Financial institutions shall be roped in to support the activities by providing timely financial
assistance for bio-fuel plantations establishment of expelling units, storage sheds, refineries
etc.

4.1.4 Small Hydro
Tax incentives such as enhanced capital allowances
IREDA provides low interest rate loans for hydel power stations up to 25 MW
State specific capital subsidies are provided as given below
o Special Category States (NE Region, J&K, H.P and Uttarkhand) - Rs. 20,000 per
kW for installations upto 1 MW (for private projects), Rs. 2 crores for 1
st
MW
followed by Rs. 30 lakhs for each additional MW
o Other States Rs. 12,000 per kW for installations upto 1 MW (for private
projects), Rs. 1.2 crores for 1
st
MW followed by Rs. 20 lakhs for each
additional MW
Incentives for detailed survey and investigation
Incentives for Detailed Project Report (DPR) preparation
Interest subsidy for commercial projects
Financial support for renovation, modernization and capacity up-rating of old SHP
stations
Financial support for development / up-gradation of water-mills

Other incentives include: Ability for power wheeling and banking, buy-back arrangement by
state electricity boards, ability to sell to third (private) parties and electricity duty
exemption. As electricity is a state subject in India, the incentives for each of the above are
different for different states.

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4.2 Renewable Purchase Obligations State-wise

S. No. State RE Source 2010-11 2011-12
1 Gujarat Wind 4.50% 5.00%
Solar 0.25% 0.50%
others 0.25% 0.50%
Total 5% 6%
2 Maharashtra Solar 0.25% 0.25%
Non-solar 5.75% 6.75%
Total 6% 7%
3 Uttaranchal Solar 0.25% 0.50%
Non-solar 3.75% 4.50%
Total 4% 5%
4 Manipur Solar 0.25% 0.25%
Non-solar 1.75% 2.75%
Total 2% 3%
5 Mizoram Solar 0.25% 0.25%
Non-solar 4.75% 5.75%
Total 5% 6%
6 Jammu & Kashmir Total 1% 3%
7 Uttar Pradesh Solar 0.25% 0.50%
Non-solar 3.75% 4.50%
Total 4% 5%
8 Tripura Solar 0.10% 0.10%
Total 1% 1%
9 Jharkhand Solar 0.25% 0.50%
Non-solar 1.75% 2.50%
Total 2% 3%
10 Himachal Pradesh Solar 0% 0.10%
Non-solar 10% 11%
Total 10.10% 11.1
11 Orissa Solar 0.10%
Non-solar 1.00% 1.20%
Co-gen 3.50% 3.70%
Total 4.50% 5%
12 Assam Solar 0.05% 0.10%
Total 1.40% 2.80%
13 Tamil Nadu 14%

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14 Delhi 1%
15 Andhra Pradesh 5%
16 Karnataka 11%
17 West Bengal 10%
18 Rajasthan 9.50% 9.50%
19 Madhya Pradesh 10%
20 Punjab 4%
21 Haryana 10%

4.3 State-wise Feed-in-tariffs for Wind Power

Table: Comparison of Tariffs and Policies for Wind Power in Key States
States Tariff rates per
KWh
Annual tariff escalation Percentage Renewable
Portfolio Standard for
Wind
Andhra
Pradesh
Rs. 3.50 Constant for 10 years for the
PPAs to be signed during 01-05-
09 to 31-03-2014
5% for all RE(2011/2012)
Gujarat** Rs. 3.56 No escalation for 25 years of
project life
5% (2011/2012)
5.5% (2012/2013)
Haryana Rs. 4.08 With 1.5% per year for 5th years 10% (2010/2011) for all RE
Karnataka* Rs. 3.70 No escalation for 10 years 7-10% (2010/2011) for all
RE
Kerala Rs. 3.60 No escalation for 20 years of
project life
3% (2011/2012
&2012/2013) for all RE
Madhya
Pradesh**
Rs. 4.35 No escalation for 25 years of
project life
6% (2011/2012)
Maharashtra Wind Zone I-Rs.
5.07
Wind Zone II-RS.
4.41
Wind Zone III-Rs.
3.75
Wind Zone IV-Rs.
3.38
No escalation for 13 years 7% (2011/2012)
8% (2012/2013) for all RE
Orissa Rs. 5.31 No escalation for 13 years 5% for all RE (2011/2012)
Punjab Rs. 3.49 With base year 2006/07 with 5
annual escalation @5% up to
2011/12
4% for all RE (2011/2012)

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Rajasthan** Rs. 3.87 &Rs. 4.08 No escalation for 25 years of
project life
Rs. 3.87 for Jalsalmer, Jodhpur
&Balmer districts while Rs. 4.08
for other districts
7.5% (2011/2012)
Tamil Nadu Rs. 3.39 No escalation for 20 years of
project life
14% for all RE (2010/2011)
Uttarakhand Wind Zone I-Rs.
5.15*
Wind Zone II-Rs.
4.35*
Wind Zone III-Rs.
3.65*
Wind Zone IV-Rs.
3.20*
Rs. 5.65 for first 10 years &Rs.
3.45 for 11
th
year onward
3.00 for 11
th
year onward
2.55 for 11
th
year onward
2.30 for 11
th
year onward
4.53% for all RE
(2011/2012)
West Bengal* Rs. 4.87 No escalation for 10 years 3% for all RE (2011/2012)
*RPS for Bengaluru Electricity Supply Company Ltd (BESCOM), Mangalore Electricity Supply Company Ltd (MISCOM), Calcutta
Electricity Supply Company Ltd (CISCOM) is 10% while for HebM Electricity Supply Company Ltd (HESCOM) and Hukari, it is 7%
**RPS specific only for Wind
Source:MNRE

4.4 State-wise Feed-in-tariffs for Biomass Power

Table: Comparison of Tariffs and Policies for Biomass and Cogeneration Power in Key States
States Tariff rates per
KWh
Annual tariff escalation Percentage Renewable
Portfolio Standard for
Biomass and
Cogeneration
Andhra
Pradesh
Rs. 4.28 (BM)
Rs. 3.48 (Cogen)
No escalation Minimum of 3.75%
Chattisgarh Rs. 3.93 (BM) No escalation 5%
Gujarat Rs. 4.40 (with AD)
(BM)
Rs. 4.55 (with AD)
(Cogen)
No escalation 10%
Haryana Rs. 4.00 (BM)
Rs. 3.74 (Cogen)
With base year 2007/08, annual
escalation @ 3%
1%

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Karnataka Rs. 3.66 (PPA
signing date) to
Rs. 4.13 (10
th

year) (BM)
Rs. 3.59 (PPA
signing date) to
Rs. 4.14 (10
th

year) (Cogen)

No escalation Minimum 10%
Kerala Rs. 2.80 (BM) With base year 2000/01, annual
escalation @ 5% for five years
3%
Maharashtra Rs. 4.98 (BM)
Rs. 4.79 (Cogen)
No escalation 6%
Madhya
Pradesh
Rs. 3.33 to 5.14
for 20 years
Annual escalation of 3-8 paise 0.8%
Punjab Rs. 5.05 (BM)
Rs. 4.57 (Cogen)
Annual escalation @ 5% for both
BM and Cogen
Minimum of 3%
Rajasthan Rs. 4.72 (water
cooled BM)
Rs. 5.17 (air
cooled BM)
No escalation 1.75%
Tamil Nadu Rs. 4.50-4.74
(BM)
Rs. 4.37-4.49
(Cogen)
Annual escalation @ 2% Minimum of 13%
Uttaranchal Rs. 3.06 (BM)
Rs. 3.12 (Cogen)
No escalation 9%
Uttar Pradesh Rs. 4.29 (existing)
Rs. 4.38 (new)
With base year 2006, annual
escalation at 4 paise/year
4%
West Bengal Rs. 4.36

Fixed for 10 years 4%
Bihar Rs. 4.17 (BM)
Rs. 4.25 (Existing
cogen)
Rs. 4.46 (New
cogen)
No escalation 1.5%
Orissa Rs. 4.09 No escalation
BM Biomass Power
Cogen Cogeneration Plants
Source: MNRE

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5. Summary of Renewable Energy Costs & Returns

This section provides a summary of costs and returns for the various renewable energy
sources in India. These data will aid a prospective investor in doing a preliminary evaluation
of the economic feasibility for investments.

5.1 Levelized Cost of Electricity (LCoE) of Electricity Sources

The following list provides EAIs estimates of the Levelized Cost of Electricity (LCoE)

*: Levelized cost denotes the total cost, after taking into account all direct and indirect variable expenses such as insurance, and
depreciation of capital costs. All investments assume a 70:30 debt: equity split.

Energy Source Levelized cost of electricity
production* (Rs. /kWh)
Coal / natural gas 2.2 2.6
Wind 2.753.5
Biomass 3 4
Solar PV 10 12
Solar CSP 9 10
Small hydro 2.2 3
Large hydro 2.3 3.2
Waste to energy 3.5-6
Diesel generator sets 13 15

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5.2 Costs of Renewable Energy Sources

Indicative Capital and Operational Expenses of Renewable Energy Sources
All estimates are India-specific

Capex
(Rs.crores/M
W, unless
mentioned
otherwise)
Opex
(Paiseper
kWh, unless
mentioned
otherwise)
Tariff
(Rs./kWh,
unless
mentioned
otherwise)
Equity IRR (%) Payback
Period
(years)
Solar PV 15 60 10.50
17.90
14-20
(1)
5-7
(1)

Solar CSP 12 90 11 15 14-20
(1)
5-7
(1)

Biomass
Power
(2)

5.5 100
(excluding
cost of
biomass)
3.50 5 20-25 4-5
Solar
Thermal
for
Heating /
Drying
Rs. 9000/sq
m
(3)

45/thermal
kWh
NA 20-25 4-5
Ethanol Rs.13/annual
liter
Cellulosic:
Rs.17/liter
Corn:
Rs.7/liter
Rs. 27/liter Corn: 13
Sweet
sorghum :19
7 years
reported for
a case of
solid
substrate
fermentatio
n, ethanol
from sweet
sorghum
Biodiesel Rs 10-11/
annual liter
Rs. 56/
liter
Rs. 34/liter Currently,
equity IRRs for
biodiesel
projects fall in a
wide range of 5
20 owing to
the diverse
feedstocks and
processes.
Consequent
to a wide
range for
the equity
IRRs, the
payback
period
estimates
also fall in a

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wide range
of 4-15
years.
Small
Hydro
5.5 60 2.20 2.60 17-20 5-6
Large
Hydro
7.5 25 2.50 10-14 7-9
Wind 6 45 3.70 - 5 17 6
Waste to
Energy
9-13 100 Not available 12-14
(6)
8-9
(6)

Geotherm
al
4.8 7.9
(5)
75 NA 17-20 5-6
Wave 14.5 120-130 NA 8-9
(6)
11-13
(6)

Tidal
(stream)
12 130 NA 10-12
(6)
9-10
(6)

(1) Varies, depending on the incentive structures provided; 20%, under the National Solar Mission
incentives
(2) Data provided as a representative data for both biomass combustion and gasification; combustion has
less IRR and higher payback periods than does gasification
(3) 1 sq m produces about 400 thermal kWh per year
(4) High Opex in the initial years, owing to high maintenance and setting up costs, Opex decreases
significantly over years
(5) $1.1 million/MW for flashed steam technology, and $1.8 million/MW is for binary technology
(6) Preliminary estimates made with limited empirical data

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